Markets & Finance

Treasuries Climb on Iraq Concerns, Confidence Report

September 12, 2002

A merry "Friday the 13th" was had by some, with stocks overseas and at home mostly ending the week in a fragile state and Treasuries rounding it out in fine form.

Retail sales gained 0.8% in August as auto sales, sporting goods and home goods remained strong. August PPI drew a blank, with an unchanged headline and -0.1% core result, while September U. Michigan consumer sentiment eased to 86.2 from 87.6.

A terrorism hoax in Florida and chemical explosion in Texas kept the safety premium high into the weekend, while distracting stocks after another bout of hostile rhetoric between the U.S. and Iraq. President Bush gave the U.N. "days or weeks" to take action on Iraq and Baghdad rejected any unconditional return of weapons inspectors.

After some midday profit-taking Treasuries lit up again in the afternoon following a series of bullish call option trades on five-year notes and bonds traced to the mortgage sector. The December bond closed up 29/32 at 112-13, shy of 112-21 session highs. The two-year note and 30-year bond spread was static on the day, but closed one basis point steeper at +272 basis points from Thursday.

The buck surged 2.3% versus the yen on fund short-covering and oil gushed a $1.